To My Fellow Shareholders:
Fiscal year 2023 was a strong year for NETSCOUT. We met our top-line and exceeded our bottomline financial objectives. Additionally, we continued to advance our strategy to deliver high-value solutions that enable our customers to succeed in today’s increasingly dynamic and complex digital world. As a result, we entered fiscal year 2024 with strong momentum as a market leader in several attractive and growing end markets.
Delivering on Our Fiscal Year 2023 Financial Objectives
In fiscal year 2023, we grew revenue by nearly 7% year-over-year to approximately $915 million as we benefitted from growth in both our service assurance and cybersecurity product lines. We also demonstrated strong operating leverage as we expanded our non-GAAP operating margin by 1.6 percentage points. Consequently, fiscal year 2023 non-GAAP EPS grew 18% to $2.18, more than double our revenue growth rate. As a result of this performance, we generated free cash flow of more than $145 million in fiscal year 2023.
From a capital allocation perspective, we returned approximately $150 million to our shareholders in fiscal year 2023 through an accelerated share repurchase program. Additionally, we fortified our strong financial position by repaying approximately $250 million of our outstanding revolving credit facility balance. As a result, we brought our outstanding debt balance down to $100 million by the fiscal year end. We continue to have adequate access to liquidity with our cash and cash equivalents and $700 million remaining undrawn on our revolving credit facility.
Advancing our Strategic Priorities
From a strategic perspective, we advanced several technology initiatives that we expect will serve as critical long-term building blocks for driving revenue growth and expanding profitability as we deliver on our mission as “Guardians of the Connected World.”
One of these advances is the development of our next generation Omnis Cybersecurity solution with enhanced features such as advanced network detection and response that leverages machine learning to reduce false positives. By building on learnings from our initial launch last fiscal year, our cybersecurity solutions possess a differentiated approach with a faster mean time to resolution compared with competing products. We expect the Omnis solution to be a high-value product for existing customers, who will be able to enhance their return on investment and build upon their already installed service assurance infrastructure to address cybersecurity challenges.
We also have developed and launched two new DDoS solutions. Our Dynamic DDoS adapts to the evolving threat landscape and automates the countermeasures used to address cyberattacks, including the latest multi-vector direct path attacks. Our Mobile DDoS Security extends our powerful Arbor DDoS capabilities, which Internet Service Providers currently use in their wireline networks, to help protect carriers’ mobile networks, neutralizing attacks over that distributed threat surface.
Continued Progress with our ESG Efforts
We continue to advance our Environmental, Social, and Governance programs that we believe contribute to long term value creation for our stakeholders and align with our strategy and mission. This integrated program includes product sustainability and sustainable operations, responsible management of our supply chain, human capital excellence, ethical business practices, and data privacy and security. In the area of governance, we appointed two new directors to our Board, Shannon Nash and Marlene Pelage. Both are deemed qualified financial experts, further expanding the perspectives and expertise of our Board of Directors.
As we mature our ESG program, we are voluntarily disclosing information that maps to two well-known frameworks, the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosures (TCFD). I encourage readers to visit our website at www.netscout.com to review our latest report and gain more information on NETSCOUT’s ESG progress.
Looking Ahead to Fiscal Year 2024 and Beyond
For fiscal year 2024, we remain committed to operating our business with a balanced approach to revenue growth and profitability as we manage the dynamic macro-economic environment. We entered the fiscal year expecting to continue to grow revenue, gain operating leverage, improve our margins and diluted EPS performance, and generate solid free cash flow.
Longer term, we remain focused on driving toward our business objectives and advancing our strategy to ensure the performance, availability, and security of mission-critical infrastructure for organizations around the globe, anytime, anywhere, as “Guardians of the Connected World.” We remain uniquely positioned to help our diverse customer base capitalize on major technology trends — including protection against expanding cybersecurity threats, digital transformation, and 5G network evolution — to succeed in today’s increasingly distributed, rapidly evolving, and complex digital world.
In closing, I would like to thank my fellow NETSCOUT Guardians around the world for their contributions and dedication and our customers, partners, and other stakeholders for their continued support. With nearly four decades of experience here at NETSCOUT, I continue to be inspired by the work we are doing, and my pride and enthusiasm for the Company and our future remains as strong as ever. We look forward to sharing our progress and achievements with you over the course of fiscal year 2024 and beyond.
Sincerely,
Anil Singhal
Co-Founder, President, Chief Executive Officer and Chairman of the Board
